Callaway 2015 Annual Report Download - page 29

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terms, “closeouts,” including closeouts of products that were recently commercially successful, and significant tour and
advertising spending by competitors continue to generate intense market competition. Furthermore, continued downward
pressure on pricing in the market for new clubs could have a significant adverse effect on the Company’s pre-owned club
business as the gap narrows between the cost of a new club and a pre-owned club. Successful marketing activities, discounted
pricing, consignment sales, extended payment terms or new product introductions by competitors could negatively impact
the Company’s future sales.
Golf Balls. The golf ball business is also highly competitive. There are a number of well-established and well-financed
competitors, including one competitor with an estimated U.S. market share of over 50%. The Company’s competitors continue
to incur significant costs in the areas of advertising, tour and other promotional support. The Company believes that to be
competitive, the Company also needs to continue to incur significant expenses in tour, advertising and promotional support.
Unless there is a change in competitive conditions, these competitive pressures and increased costs will continue to adversely
affect the profitability of the Company’s golf ball business.
Accessories. The Company’s accessories include golf bags, golf gloves, golf footwear, golf apparel and other items. The
Company faces significant competition in every region with respect to each of these product categories. In most cases, the
Company is not the market leader with respect to its accessory markets.
The Company’s golf club and golf ball business has a concentrated customer base. The loss of one or more of the Company’s
top customers could have a significant effect on the Company’s golf club and golf ball sales.
On a consolidated basis, no one customer that distributes golf clubs or golf balls in the United States accounted for more
than 9% of the Company’s consolidated revenues in 2015, and no one customer accounted for more than 8% of the Company's
consolidated revenues in each of 2014 and 2013. The Company's top five customers accounted for no more than 26% of the
Company's consolidated revenues in 2015, 25% in 2014, and 23% in 2013. On a segment basis, the Company's top five golf
club customers accounted for approximately 25% of total consolidated golf club sales in each of 2015 and 2014, and
approximately 23% in 2013. The top five golf ball customers accounted for approximately 30% of total consolidated golf ball
sales in each of 2015 and 2014, and 27% in 2013. A loss of one or more of these customers would have a significant adverse
effect on the Company’s golf club and golf ball sales.
International political instability and terrorist activities may decrease demand for the Company’s products and disrupt its
business.
Terrorist activities and armed conflicts could have an adverse effect upon the United States or worldwide economy and
could cause decreased demand for the Company’s products as consumers’ attention and interests are diverted from golf and
become focused on issues relating to these events. If such events disrupt domestic or international air, ground or sea shipments,
or the operation of the Company’s manufacturing facilities, the Company’s ability to obtain the materials necessary to
manufacture its products and to deliver customer orders would be harmed, which would have a significant adverse effect on
the Company’s results of operations, financial condition and cash flows. Such events can negatively impact tourism, which
could adversely affect the Company’s sales to retailers at resorts and other vacation destinations. In addition, the occurrence
of political instability and/or terrorist activities generally restricts travel to and from the affected areas, making it more difficult
in general to manage the company’s international operations.
The Company’s business could be harmed by the occurrence of natural disasters or pandemic diseases.
The occurrence of a natural disaster, such as an earthquake, tsunami, fire, flood or hurricane, or the outbreak of a pandemic
disease, could significantly adversely affect the Company’s business. A natural disaster or a pandemic disease could
significantly adversely affect both the demand for the Company’s products as well as the supply of the components used to
make the Company’s products. Demand for golf products also could be negatively affected as consumers in the affected regions
restrict their recreational activities and as tourism to those areas declines. If the Company’s suppliers experienced a significant
disruption in their business as a result of a natural disaster or pandemic disease, the Company’s ability to obtain the necessary
components to make its products could be significantly adversely affected. In addition, the occurrence of a natural disaster or
the outbreak of a pandemic disease generally restricts travel to and from the affected areas, making it more difficult in general
to manage the Company’s international operations.